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A FinTech Insider on Challenges in Alternative Lending

Posted October 10th, 2016

Jason Dell is an experienced payments professional with a wealth of knowledge regarding the alternative lending space. With a background that includes firms such as Kabbage, Fiserv, and Motorola, his career is a testament to the successful intersection of technology and financial services. We connected to talk payments, fintech innovation, and challenges in alternative lending.

The analytics professionals we work with are typically focused on statistical implementation, model development, or analysis, so I thought it would be useful for our audience to hear about the process of product development. You’ve had a lot of experience developing payments products throughout your career— can you give us some insight as to how it works? How do you maintain the original vision for a product in development while also allowing room for collaboration and innovation?

I am a strong advocate for the customers and users of the product. I start by building an understanding of the customer lifecycle and the problem the company is solving. Then, there is significant work to determine how the company wants to engage with customers to solve that problem in the most value-added way. That is where the collaboration and innovation takes place. The conversation involves determining what we want to accomplish with the product, and how we want to make it happen.

I personally like breaking down the product development and innovation cycles into a few steps: conceptualizing, analyzing, building, and reviewing. Throughout the process, I use the evaluation construct utilized in the design thinking methodology, which focuses on product desirability, viability, and feasibility. Together, these processes are forcing functions to drive delivery while keeping the customer, the business, and the technology aligned and at the forefront of decision making.

You’ve spent a lot of time in the payments space. What excites you about this part of the business?

What excites me most is the opportunity for a high level of disruption. New approaches and technology have allowed fast movers to advance the industry in a very customer-friendly way. And when you put the customer first, good things happen! That’s what we are seeing in the payments space right now: disruption that reduces customer friction points and leads to really great customer experience.

You’ve got a background in both consumer and commercial lending. What are the challenges specific to each?

I think the two challenging areas that stand out are regulatory oversight and the measurement of risk.

Regulatory oversight varies a bit between the two products due to the size of the populations being addressed. I think it is fair to say that the alternative consumer lending business has had much more regulatory attention focused on it, and that has been compounded with the most recent events in marketplace lending. Since the oversight tends to focus on the consumer side, the commercial side is able to develop new and innovative ways of making real time decisions more quickly because there aren’t the added hoops to go through. When the analytics resources are limited, as is true of many young alternative lending companies, it is difficult to focus on innovation when the limited time of the analytics teams has to shift to defending processes for the regulatory bodies.

On the risk measurement side, the consumer measurement of risk has some history and structure in how to measure it. The challenge here is how to improve and incorporate other sources of data and challenge the status quo.

Insight into small businesses has historically been a problem for the commercial lending industry due to the blurring of business and personal finances. New data sources, such as non-traditional data for underwriting, and innovative data science techniques such as machine learning, have made significant strides in this area.

The success of an alternative lending business rests on speed, so the question becomes how to measure risk quickly but also with thoroughness and creativity.

You’ve been an integral part of a few startups and younger companies throughout the course of your career. Any advice to young professionals interested in breaking into that world? How do you evaluate the riskiness vs potential reward of joining a new or young company?

From a personal career perspective, I like to suggest that young professionals understand and leverage their strengths. Once onboard, they should be able to demonstrate their skills and add value immediately. This is very important because startups and younger companies are moving fast and new team members need to show that they can be impactful right away. Other areas of expertise can be broadened over time.

As far as evaluating the riskiness of a new company, my advice would be to establish key criteria to review the opportunities that are presenting themselves. I’d recommend young professionals ask themselves the following questions to determine whether or not an opportunity is worth the risk:

In the evaluation of Industry risk – Is the industry growing or contracting?

In the evaluation of Company risk – How is the company positioned to penetrate the market? How well-funded is the company?

In the evaluation of Cultural risk – What are the business and management philosophies of the senior leadership team?

The alternative lending and payments space is a dynamic environment ripe for innovation and disruption. People involved in this ever-changing world are continually struck by the challenges and possibility contained within it. Thank you, Jason for sharing your insights with us!

Editor’s Note: Shortly after we connected with Jason, he accepted a permanent position at MyBudget, the Australian personal debt management company. We wish him the best in this new role Down Under and look forward to hearing more!